Australian Executor Trustees Limited, in the matter of Australian Cinemas Pty Ltd v Australian Cinemas Pty Ltd
[2011] FCA 1267
•21 October 2011
FEDERAL COURT OF AUSTRALIA
Australian Executor Trustees Limited, in the matter of Australian Cinemas Pty Ltd v Australian Cinemas Pty Ltd [2011] FCA 1267
Citation: Australian Executor Trustees Limited, in the matter of Australian Cinemas Pty Ltd v Australian Cinemas Pty Ltd [2011] FCA 1267 Parties: AUSTRALIAN EXECUTOR TRUSTEES LIMITED ACN 007 869 794 v AUSTRALIAN CINEMAS PTY LTD ACN 096 376 920 File number: QUD 289 of 2011 Judge: LOGAN J Date of judgment: 21 October 2011 Catchwords: CORPORATIONS – application to wind up company – where company in administration – where administration is in early stage – whether to adjourn winding up to allow administration to continue – where alternatives to winding up yet to be investigated – winding up application adjourned Legislation: Corporations Act 2001 (Cth) ss 436A, 440A Cases cited: Australian Securities and Investments Commission v Storm Financial Limited (Recs and Mgrs Apptd) (Admin Apptd) (2009) 71 ACSR 81 considered
Re Octaviar Ltd (formerly MFS Ltd) [2008] QSC 216 citedDate of hearing: 21 October 2011 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 13 Solicitor for the Plaintiff: Rostron Carlyle Solicitors as Town Agents for Teddington Legal Counsel for the Defendant: Mr D Marks Solicitor for the Defendant: Nyst Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 289 of 2011
IN THE MATTER OF AUSTRALIAN CINEMAS PTY LTD ACN 096 376 920 BETWEEN: AUSTRALIAN EXECUTOR TRUSTEES LIMITED ACN 007 869 794
PlaintiffAND: AUSTRALIAN CINEMAS PTY LTD ACN 096 376 920
Defendant
JUDGE:
LOGAN J
DATE OF ORDER:
21 OCTOBER 2011
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.The hearing of the winding up application is adjourned to 9:30am on 24 November 2011.
2.The costs of and incidental to the adjournment are to be the plaintiff’s costs in the winding up application in any event.
3.Any further affidavits to be relied upon by the defendant in respect of the winding up application are to be filed not later than 22 November 2011.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 289 of 2011
IN THE MATTER OF AUSTRALIAN CINEMAS PTY LTD ACN 096 376 920 BETWEEN: AUSTRALIAN EXECUTOR TRUSTEES LIMITED ACN 007 869 794
PlaintiffAND: AUSTRALIAN CINEMAS PTY LTD ACN 096 376 920
Defendant
JUDGE:
LOGAN J
DATE:
21 OCTOBER 2011
PLACE:
BRISBANE
REASONS FOR JUDGMENT
Australian Executor Trustees Limited (Australian Executor Trustees) has applied, under the Corporations Act 2001 (Cth) (Corporations Act), for the winding up in insolvency of Australian Cinemas Pty Ltd (Australian Cinemas). The basis for the application for the winding up of Australian Cinemas is a failure on its part to comply with the terms of a statutory demand, with the consequential effect that it is taken to be unable to pay its debts as they fall due.
The company has appeared today. Evidence read on behalf of the company discloses that Australian Cinemas is presently in administration. On 20 October 2011, Mr Peter Biazos and Mr Peter Dinoris, each certified practising accountants, were appointed as administrators pursuant to s 436A of the Corporations Act. The effect of the company being in administration in relation to the application for its winding up is as set out in s 440A(2), of the Corporations Act. It is there provided:
The court is to adjourn the hearing of an application for an order to wind up a company if the company is under administration and the Court is satisfied that it is in the interests of the company’s creditors for the company to continue under administration rather than be wound up.
Australian Cinemas submits that it is in the interests of the company’s creditors that the company continue under administration. In Australian Securities and Investments Commission v Storm Financial Limited (Recs and Mgrs Apptd) (Admin Apptd) (2009) 71 ACSR 81, at [25] to [26] (ASIC v Storm Financial), I summarised and, extracting passages from authority, highlighted considerations which are relevant in circumstances such as the present. I do not propose to repeat what is there stated. Ultimately, the Court needs to be persuaded in the way set out in s 440A(2).
Here, the administration is in a very early stage, indeed. Mr Biazos deposes that his present understanding, based on being provided with the unaudited balance sheets of Australian Cinemas, is that it has net assets in the sum of approximately $987,000, and total liabilities “in the order of $3,550,000 to $4,380,000”. He believes that a receiver has been appointed.
Such an appointment is not, as yet at least, recorded in the records of the Australian Securities and Investments Commission (ASIC), having regard to the search extract exhibited to Mr Biazos’ affidavit. There is, though, some separate indication of the appointment of joint and several receivers and managers apparent from a letter addressed to Australian Executor Trustees’ solicitors of today’s date, by Messrs Stimpson and Rose of SV Partners, who describe themselves as receivers and managers of Australian Cinemas. The basis upon which they came to be appointed as receivers and managers is not clear at the moment, although the ASIC search discloses the existence of charges over corporate assets. Mr Biazos voices the view that, as a receiver has been appointed, the risk of business assets being dissipated is low.
It appears from Mr Biazos’ affidavit that Australian Cinemas carries on, as its corporate name might be thought to suggest, cinema businesses. It does so by the operation of two cinema complexes, one in Croydon, Victoria, the other at Nerang in this State. Both are said by Mr Biazos to be operational. They are said to employ nine staff and 19 staff at the respective sites.
Mr Biazos’ information is that the receiver has been appointed by Westpac Bank on the basis of operating the business of Australian Cinemas so that it can be sold as a going concern. That provides a degree of comfort in relation to a concern which I would otherwise have had as to the conduct of a business whilst a corporation was apparently insolvent.
Quite what return there would be to creditors, in the event of the sale of Australian Cinemas’ business as a going concern by their receivers and managers, is as yet unclear. However, I remind myself that that position is by no means unusual at a stage of an administration such as the present, as Philip McMurdo J noted in Re Octaviar Ltd (formerly MFS Ltd) [2008] QSC 216, at [55]. I also remind myself that a very particular purpose underpins Pt 5.3A of Ch 5 of the Corporations Act, in terms of offering to creditors creative and constructive alternatives to the winding up of a company. See [1] to [3] of my reasons for judgment in ASIC v Storm Financial.
Mr Biazos voices the opinion that some four weeks would be necessary for the purpose of investigating the companies’ affairs and reporting, both to the Court and creditors, on the prospects, if any, of a Deed of Company Arrangement being put and what dividend might flow to unsecured creditors in the event of a winding up. Even so, alternatives present themselves, such as adjourning for a much shorter period and then considering the position afresh at that stage as to whether, on more detailed material than the present, a further adjournment is warranted. That has the detriment, though, of visiting upon the plaintiff, Australian Executor Trustees, the costs of possibly two, rather than one, further appearances.
It is apparent from the balance sheet which has become Exhibit 2 today that there are a number of inter-company loans and, seemingly, loans from and to shareholders, both on the asset and liabilities side of the ledger. These may present options for creditors in the context of a Deed of Company Arrangement which would not be present in the event of a winding up. By that I mean, depending upon the disposition of members of the Bailey family, who are creditors, it may be that particular indebtedness is foregone in the context of a Deed of Company Arrangement proposal. Again, though, there is nothing of that kind of proposal presently put. It is nothing more than something which might conceivably commend itself to the members of the Bailey family in the context of an administration.
In any event, I am satisfied, having regard to Mr Biazos’ affidavit, that it is at least in the interests of creditors that the position, so far as the possibility of a better return than a winding up in insolvency, be investigated. It also seems to me that the investigation is not unlikely to take the length of time Mr Biazos describes.
That being so, the question becomes as to when the application should be adjourned? As I have indicated, a combination of the desirability of a considered investigation and not visiting unnecessary costs on the plaintiff, Australian Executor Trustees, along with the position that the current conduct of the business seems to have the support of the bank, at the behest of which the receivers and managers were appointed, persuades me that the adjournment should be for a period longer than just a week, but, rather, in the order of that sought by Australian Cinemas, based on Mr Biazos’ affidavit. Accordingly, I adjourn the hearing of the winding up application to 9.30 on 24 November 2011.
As to costs, so the order that I make is that the costs of, and incidental to, the adjournment are to be the plaintiff’s costs in the winding up application, in any event.
I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. Associate:
Dated: 4 November 2011
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